Cleantech: Bright Spot In U.S.-China Cooperation

Despite heated rhetoric from protectionist corners that China and the United States must compete over the massive dollars associated with the clean energy industry, some signs are actually emerging that we’re entering a phase of mutual benefit and collaboration.

It’s a natural fit: the U.S. is an innovation engine short of capital and customers, and China is a commercialization hotspot with lots of money and a major environmental problem. Thanks to interesting new deal structures that allow for commercialization to happen while addressing U.S. intellectual property concerns, cooperation finally appears to be a reality.

In April, Zhongding Group announced a $200 million investment to scale the production of U.S. company EcoMotor’s ultra-efficient motor technology. A new manufacturing facility will be built in China to commercialize a technology that would have otherwise taken years to come to market (if ever) in the United States. Similar deals have started to add up. Wanxiang Holdings acquired faltering U.S. battery company A123 Systems (now renamed B456 – can you say rebrand fail?) for $250 million and also invested $420 million in GreatPoint Energy, a company that turns coal into natural gas. Coal-to-butanol company IGP Energy similarly formed a joint venture with Chinese coal giant Yankuang Group for five facilities. Shanghai steel giant Baosteel also invested in waste-to-fuel company LanzaTech, funding a demonstration plant that is expected to result soon in a fully commercial facility.

All of these deals, and many others, have meant rapid acceleration of technology that may not have otherwise happened. But the benefit isn’t just flowing to U.S. cleantech companies starved for cash. China also desperately needs the technologies to address mounting environmental concerns – air pollution, severe water shortages, food safety and the list goes on and on.

According to Cleantech investor Greg Manuel, there is a 5-plus year “innovation delta” between the clean technologies being developed in the United States and those in development in China (with China lagging behind). Similarly, Manuel says, there will be a $4.5 billion shortfall in capital for U.S.-developed clean technology start-ups in the next three years. “This emerging pattern of cooperation is still in its early stages. But there is a tremendous vector of opportunity when you look at the innovation delta, capital gap and severe environmental and energy challenges facing large Chinese enterprises with large pools of cash,” said Manuel, formerly a special advisor for energy affairs to U.S. Secretary of State Condoleezza Rice and senior vice president for corporate development and strategy at Amyris.

This post originally appeared on Forbes.com

Clean Energy: Too Many Interests, Not Enough Group

There is a lot of interest in clean energy. Here’s just a partial list of the US groups out there: American Business for Clean Energy,  Business Council for Sustainable EnergyEnvironmental EntrepreneursInvestor Network on Climate RiskBiomass Power AssociationRenewable Fuels AssociationClean Economy NetworkUS Climate Action PartnershipClean Energy WorksUS Clean Heat and Power AssociationSolar AllianceWe Can LeadAmerican Wind Energy AssociationAmerican Coalition for EthanolAdvanced Biofuels CoalitionWind CoalitionBusiness for Innovative Climate and Energy Policy,  Growth Energy,National Hydropower AssociationGeothermal Energy AssociationSolar Energy Industry AssociationSolar Electric Power AssociationCeresAmerican Council on Renewable EnergyAmerican Biogas Council,Carbon War RoomAlgal Biomass AssociationFuel Cell and Hydrogen Energy AssociationElectrification CoalitionAmerican Council for Energy Efficient EconomyGridwise AllianceDemand Response and Smart Grid CoalitionAmerican Energy Innovation CouncilBlueGreen Alliance, Water Innovations Alliance.

Remember, that is a partial list. And that doesn’t even include state and regional groups, of which there are dozens more.

Get the picture? A jumble of letters: “C” for council (five) and coalition (five); “A” for association (11) and alliance (four) and “S” for solar (three); plus at least four groups directly and indirectly touching “B” (for biofuels) and more than half a dozen groups broadly positioned around “E” for energy. What does that spell? Trouble with a “T”. At a time when the clean energy industry needs one powerful voice to drive policy and get federal and state lawmakers to actually do something visionary, what we are getting is a 100-part disharmony of sometimes clashing, sometimes overlapping agendas. With the recent shift in political winds in DC and many state houses signaling a tougher road ahead for a clean energy agenda, the need for that unified voice is even greater.

In fairness, an examination of the missions for the various groups often shows material differences in their focus, but how important are those differences in the broader picture? That is a question that we need to be asking ourselves.

The environmental NGOs – EDF, NRDC, WRI, etc – failed to influence national policy in a significant way during the first half of Obama’s current (and possibly only) term. But the truth is that, when it comes to getting more aggressive adoption of clean energy policies, the same can be said for the business interest groups listed above. A rationalization and consolidation of these groups is a reasonable expectation, and even if that fails to materialize, there is a strong need for an all-encompassing umbrella “organization of organizations” that rises above the petty jealousies and turf wars that often make the trade association, non-profit world ineffectual and scattered. Just as a consolidation of the cleantech industry itself is overdue, so too is one for the organizations that represent it.

Ironically, my involvement in the Clean Economy Network (CEN) was motivated by a desire for an industry defined by “distributed energy” to become more centralized in its approach to policy. Whether its CEN or some other group that occupies a higher, more unified plane, one thing is certain: faced with a torrent of cash-infused lobbying from big oil and coal companies, a drip campaign from dozens of groups representing a fractured clean energy industry won’t have the desired impact – rapid and decisive action from policymakers.

I plan on being in Washington, D.C. on January 24-25, 2011 to attend the first CEN business leaders summit, with the hope that at least part of the proceedings will be a serious dialogue on organizational strategy for the clean energy industry. It would be great if the representatives of all the groups owning patches of the industry can be there too to create a more cohesive quilt.

GHG: regulation vs. legislation?

I asked my friend Graham Noyes, attorney at renewable energy law firm Stoel Rives focused on bioenergy projects, federal energy incentives and carbon monetization, for his thoughts on the Kerry Lieberman bill.

Q: What was your main takeaway from the bill?
A: Some context first. There’s a massive potential hammer out there on GHG emitters in terms of the risk of regulation under the Clean Air Act (CAA) by the EPA, which has already issued an endangerment finding that found GHGs to be a danger to public health and welfare, thereby making the EPA obligated to regulate GHG’s under the CAA. So the wheels are turning forward at the EPA to regulate GHG. That’s what the EPA will do if nothing else happens. So it’s really surprising that Kerry Lieberman imposes what I think to be much stricter limitations on the EPA than the status quo.

In that sense the bill is very favorable to those industries that have the most to lose from GHG regulation, because it essentially weakens the regulatory landscape for GHG intensive industry when compared to what the EPA is likely to do. That’s why we have the strong industry support lined up for the bill. What’s odd is that we have universal Republication opposition (from a party known for its pro-business stance), and near universal Democratic support (from a party known to support more environmental protections). That is a fundamental disconnect.

The 800 lb gorilla in the room is the EPA’s ability to utilize the CAA if the Kerry-Lieberman bill stalls. That’s a really interesting regulatory and political landscape for this thing to play out.

Q: Can you be more specific on how Kerry Lieberman is easier on emitters?
A: We don’t know what the EPA will do precisely in order to get its targets in the endangerment finding. Emissions levels, cost implications for regulated industries – we don’t know. But it’s easy to imagine a scenario in which the EPA ratchets down harder and harder on these emissions to get the problem under control, specifically the PPM concentration of CO2 in the atmosphere. By contrast, Kerry Lieberman has a slow front-end phase-in (with only some industries included in the first years), price collars and very substantial offset programs to lower the economic impact, none of which the EPA would necessarily do. Most people expect the EPA would be more onerous than Kerry Lieberman.

Q: Is legislation or regulation better at the end of the day?
A: The Clean Air Act was not designed for GHGs, but for what we usually think of as pollutants – emissions that are directly unhealthy. CO2 is not something people worry about breathing, it’s the indirect risk of global warming caused by the escalating CO2 levels that triggered the finding. CO2 is also more ubiquitous than other pollutants hence the tailoring rule actually reduces scope of CAA enforcement.

The EPA would regulate by mandate, not by consensus. If we can’t get legislation passed and the EPA begins enforcement, there will be a lot of criticism about over-reaching and strangling industry. EPA would take a lot of heat for this.

Q: Some argue that EPA will take much longer to regulate than legislation.
A: I don’t necessarily think so. This legislation requires extensive rule-making that will take a long time to happen, consider the RFS2 delay. And the EPA won’t build in phase-in limits like Kerry Lieberman. If EPA moves ahead on its present course, I think it would have a faster impact on emissions than the bill. Ultimately, I think this landscape will spur a deal with a surprising alliance.

Q: What are the top three ramifications on business from this bill?
A: The bill would establish a long-term value to CO2e reductions. This will benefit all renewable energy projects andsupport US offset projects in methane capture, agriculture and forestry that make good GHG sense.